LITHUANIAN MODEL FEATURES OF FINANCING MODERNIZATION OF SMALL LOCAL DISTRICT HEATING SYSTEMS
DOI:
https://doi.org/10.32999/ksu2307-8030/2026-60-4Keywords:
district heating, financial instruments, small local heating systems, modernization, effectivenessAbstract
This study analyzes the institutional environment and financial instruments for modernizing district heating systems in Lithuania, with a focus on small local district heating systems. Modernizing district heating in smaller settlements is often challenged due to low investment appeal for private capital and the limited purchasing power of consumers. It is established that Lithuania successfully overcame energy dependence at the national level and achieved a "green transition" in district heating by prioritizing the use of domestic energy resources – specifically biomass. The study outlines the key stages of district heating modernization, as well as the scope and sources of funding. It analyzes the specifics of targeted support policies for small local district heating systems in Lithuania and the financial instruments developed to modernize the heat supply sector. It has been established that, thanks to a consistent, targeted, and regulated policy, Lithuania succeeded in overcoming market barriers to investment for the modernization of small district heating systems while simultaneously leveraging their endogenous advantages to enhance consumer energy efficiency. Key regulatory policy factors and the accessibility of financial instruments that drove the successful modernization of small district heating systems in Lithuania are highlighted. The success of the modernization policy for district heating in small Lithuanian settlements was ensured by: first, the development of targeted financial instruments; second, the implementation of mechanisms to ensure broader coverage through usage limits on targeted programs; third, an integrated approach combining the modernization of heat production facilities with efforts to improve consumer energy efficiency; and fourth, a comprehensive strategy to enhance the energy efficiency of local consumer groups, particularly those with the highest energy consumption. Fifth, the strict linking of funding to target indicators for improving energy efficiency. It has been confirmed that Lithuania’s experience in modernizing district heating systems—specifically the accelerated transition from fossil fuels to renewable energy sources (biomass)—can serve as an effective solution for the future transformation of similar systems in Ukraine, given the steadily increasing role of biofuels in heat energy production according to the decarbonization trajectory.
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